L&t Finance Ltd · NSE:LTF
L&t Finance — Q2FY23 Earnings Presentation
64 slides from L&t Finance's earnings presentation, Oct 20, 2022
Slide 1: Exchange cover letter submitting investor presentation
{fj; L&T Financial Services October 20, 2022 National Stock Exchange of India Limited BSE Limited Exchange Plaza, Corporate Relations Department, Plot No. C/1, G Block, 1st Floor, New Trading Ring, Bandra - Kurla Complex, Bandra (East), P. J. Towers, Dalal Street, Mumbai - 400 051. Mumbai - 400 001.
Slide 2: Strategy & Results Update – Q2FY23
Strategy & Results Update – Q2FY23 L&T Financial Services 1
Slide 3: Disclaimer
Disclaimer The information in this presentation is provided by L&T Finance Holdings Limited (the “Company”) for information purposes only. This presentation or any information herein may not be used, reproduced, copied, photocopied, duplicated or otherwise reproduced in any form or by any means, or
Slide 4: Agenda
Agenda A Journey towards Lakshya 2026 B Q2FY23 in Perspective C Financial Update 3 @ L&T Financial Services
Slide 5: LTFS - Lakshya 2026
LTFS - Lakshya 2026 AIM. INNOVATE. CREATE. To be a top class ‘digitally enabled’ retail finance company moving from ‘product-focused’ to ‘customer-focused’ approach 4
Slide 6: Lakshya 2026 Goals
Lakshya 2026 Goals Retailisation Retail growth Asset Quality RoA GS3 <3% >80% >25% CAGR 2.8% - 3% NS3 <1% 5
Slide 7: LTFS – What do we aspire for?
LTFS – What do we aspire for? .. ) • •• • •• ••• • ••• • •• CATERING TO THE TO DELIVERING FOR RETENTION, TOP NOTCH RURAL, URBAN MASS USING DIGITAL & CREATE A TOP CLASS UPSELL & RETAIL NBFC AFFLUENT, ASPIRER & DATA ANALYTICS CREDITWORTHY POOL SUSTAINABLE CROSS-SELL SME SEGMENT OF CUSTOMERS ROA 6 @ L&
Slide 8: Organisation structure realigned to “customer focus”
Organisation structure realigned to “customer focus” RETAIL Rural Urban CUSTOMER PROFILE RURAL BUSINESS FINANCE FARMER FINANCE URBAN FINANCE SME (Small Rural Entrepreneur) (Farmer) (Urban Individual) (Urban Business) • Rural Business Loans • Two-wheeler • Micro Finance • Tractor Loans • Consumer Loa
Slide 9: Path to becoming a top class digitally enabled retail finance company
Path to becoming a top class digitally enabled retail finance company 1 Sustained profit and growth engine 2 Demonstrable strength in risk management 3 Creating Fintech @ Scale 4 Sustainable future growth through ESG 8
Slide 10: Creating a Fintech@Scale
Creating a Fintech@Scale .····· ··· ······ ········ ····· FY16 – FY21 FY26 Business Strategy ‘Geo / Product Focused’ >> ‘Geo – agnostic / Customer Focused’ Efficiency improvement Reimagining customer engagement Digital Strategy Portfolio quality management >> Best in class risk mitigation 9 @ L&T Fi
Slide 11: Creating a Fintech@Scale
Creating a Fintech@Scale Architecture: Phase 1 – Built Digital & Data Analytics Capabilities •------------------- DEEPEN ---------------------------------------------------------------- ... Product Suite Customer focused Journey Customer Retention o-o ■ Farm Loan 2W Loan ■ UNDERWRITING DISBURSEMENT
Slide 12: Creating a Fintech@Scale
Creating a Fintech@Scale Architecture: Phase 2 – Building Omni-channel Customer Ecosystem •------------------------------------------------------------------- DEVELOPING ---------------------------------------------------------------+- Customer Need Marketplace Customer Engagement Platform App '' Ru
Slide 13: Reimagining Customer Engagement - Inverting the servicing pyramid
Creating a Fintech@Scale Q2 update: Reimagining Customer Engagement - Inverting the servicing pyramid Traditional servicing New-age servicing 100% documents INVERTING THE SERVICING PYRAMID available on digital Tech enablement (% of interactions across channels) Branch & Call center Self-help options
Slide 14: Reimagining Customer Engagement - PLANET App
Creating a Fintech@Scale Q2 update: Reimagining Customer Engagement - PLANET App Enroute to establishing a geo-agnostic sourcing & servicing channel Insta loan for WhatsApp platform Credit score card Consumer loan for Consumer loan 7 lac+ Downloads Launched Launched Launched Q1FY23 Q2FY23 Q1FY23 Bui
Slide 15: Reimagining Customer Engagement - PLANET App
Creating a Fintech@Scale Q2 update: Reimagining Customer Engagement - PLANET App Enroute to establishing a geo-agnostic sourcing & servicing channel • • Mondi Price • ~ • Insurance -- nll Daily Price Moday, H .lug 2022 Insurance Made Simple 9 Anuppur,Madhya~radHh ~ " ,_.., 0 s111ctn1arbymo,k1t 'v HO
Slide 16: Agenda
Agenda A Journey towards Lakshya 2026 B Q2FY23 in Perspective C Financial Update 15 @ L&T Financial Services
Slide 17: Q2FY23 Synopsis (1/4)
Q2FY23 Synopsis (1/4) Business & Financial Updates • Retail mix at 58% of overall portfolio (up YoY from 47% in Q2FY22 and QoQ from 54% in Q1FY23) • Highest ever quarterly retail disbursement (Rs. 10,238 Cr), up 84% YoY and 15% QoQ • Retail: Continued strong business momentum across all products: o
Slide 18: Q2FY23 Synopsis (2/4)
Q2FY23 Synopsis (2/4) Business & Financial Updates • On the OTR front, Rs. 422 Cr of Retail Finance loans that had moved to 90+ DPD have been fully provided for. With this, the Normalizing impact of OTR in unsecured loans business is largely over credit cost and PAT • With excellent Retailsation, go
Slide 19: Q2FY23 Synopsis (3/4)
Q2FY23 Synopsis (3/4) Business & Financial Updates • LTFH entered into a definitive agreement with HSBC Asset Management (India) Private Limited (“HSBC AMC”) on Dec 23rd, 2021 for divestment of its Mutual Fund business: o Aggregate purchase consideration of USD 425 million (subject to adjustments as
Slide 20: Q2FY23 Synopsis (4/4)
Q2FY23 Synopsis (4/4) Regulatory Updates • RBI vide its notification dated Oct 22nd, 2021 issued a Scale Based Regulatory framework effective from Oct 1st, 2022 • RBI vide press release dated Sept 30th, 2022, categorized L&T Finance Ltd (100% subsidiary of L&T Finance Holdings Ltd) as an NBFC - Uppe
Slide 21: Agenda
Agenda A Journey towards Lakshya 2026 B Q2FY23 in Perspective C Financial Update 20 @ L&T Financial Services
Slide 22: Q2FY23 Performance: Key business metrics
Q2FY23 Performance: Key business metrics Strong Moderation in Astute Liability Stable NIMs + Strengthened Retail Finance Wholesale Management Fees Asset Quality Growth 21 @ L&T Financial Services
Slide 23: Built strengths over the years – Farmer Finance
Built strengths over the years Farmer Finance – amongst the Leading Financiers Well diversified Dealer / OEM Customer footprint Relationship Centricity • Retention products (Kisan Suvidha); • Vintage of 17+ years • 2,500+ Dealers ~28%* retention • 170 branches across 16 states • Analytics driven TA
Slide 24: Built strengths over the years – Rural Business Finance
Built strengths over the years t, Rural Business Finance - amongst the Leading Financiers ... Well diversified Operational Customer footprint excellence Centricity • Centralised underwriting; geo-strategy • Vintage of 14+ years • Retention products – ~47%* retention based on women credit penetration
Slide 25: Built strengths over the years – Two wheeler Finance
Built strengths over the years Two wheeler Finance - amongst the Leading Financiers Well diversified Dealer / OEM Customer footprint Relationship Centricity • 5,000+ Dealers • Vintage of 10+ years • Strong New To Credit proposition (~50%) • Algorithm based preapproved TA for • 93 locations across In
Slide 26: Translating to strong Retail Finance Growth (1/5)
Translating to strong Retail Finance Growth (1/5) Sustained traction in disbursements in Rs Cr RETAIL DISBURSEMENTS 10,238 8,938 5,579 Q2FY22 Q1FY23 Q2FY23 RURAL BUSINESS FINANCE FARMER FINANCE URBAN FINANCE 4,418 4,166 3,811 1,532 1,304 3,462 1,149 2,116 2,314 Q2FY22 Q1FY23 Q2FY23 Q2FY22 Q1FY23 Q2F
Slide 27: Translating to strong Retail Finance Growth (2/5)
t,. t,, Translating to strong Retail Finance Growth (2/5) Leading to book growth across businesses ...... t I '# I in Rs Cr RETAIL BOOK 52,040 47,794 40,934 Q2FY22 Q1FY23 Q2FY23 RURAL BUSINESS FINANCE FARMER FINANCE URBAN FINANCE 23,841 21,607 15,840 18,544 14,397 11,309 11,081 11,597 11,865 Q1FY22
Slide 28: Translating to strong Retail Finance Growth (3/5)
Translating to strong Retail Finance Growth (3/5) Normalized collections across businesses URBAN FINANCE RURAL BUSINESS FINANCE ~~~~~~ TWO-WHEELER - . .. - FY22 - FY23 i RURAL BUSINESS LOANS 97.0% l9a.o%1l9a.s%i198.3%1l99.o%1l9a.o%1l9a.3•1. 1l 9a.2%11 9a.2%1l9a.a%1 ~~~~~~ & MICRO FINANCE 190.3%1 97.
Slide 29: Translating to strong Retail Finance Growth (4/5)
t, Translating to strong Retail Finance Growth (4/5) t, Scaling-up new products: SME Finance ... ... Performance Small and Medium Enterprise Finance ---------------------------------------------------------------------------------------------------------------------- . '' • Geographical footprint ex
Slide 30: Translating to strong Retail Finance Growth (5/5)
Translating to strong Retail Finance Growth (5/5) Thus Bolstering Retailisation ASSET MIX Q2FY22 Q1FY23 Q2FY23 3% 1% 1% 13% Retail 16% Retail Retail 18% 32% 13% 34% 13% 36% 13% 21% 25% 14% 27% 10% 11% Retail - 47 % Retail - 54 % Retail - 58 % Rural Business Finance Farmer Finance Urb an Finance Real
Slide 31: Moderation in Wholesale Finance (1/2)
Moderation in Wholesale Finance (1/2) Infrastructure Finance performance in line with strategy in Rs Cr DISBURSEMENTS BOOK 31,284 29,986 28,461 1,347 1,402 D718 Q2FY22 Q1FY23 Q2FY23 Q2FY22 Q1FY23 Q2FY23 Continued asset / capital light model in Infrastructure Finance 30 @ L&T Financial Services
Slide 32: Moderation in Wholesale Finance (2/2)
Moderation in Wholesale Finance (2/2) Exploring Exit from Real Estate Finance business in Rs Cr DISBURSEMENTS BOOK 12,248 9,809 9,136 D412 121 93 Q2FY22 Q1FY23 Q2FY23 Q2FY22 Q1FY23 Q2FY23 Collections-led book run down (Rs 852 Cr of pre / repayments in Q2) 31 @ L&T Financial Services
Slide 33: Consolidated performance – Strong liability profile
Consolidated performance Strong liability profile DIVERSIFIED LIABILITY MIX WEIGHTED AVERAGE COST OF BORROWING (WAC) 5% 1% 3% 0.4% 6% Bank Loan 3%7% 7% NCD Pvt 36% 46% Retail NCD 8.32% CP 41% 7.82% 45% ECB 7.65% 7.64% 7.53% 7.47% 7.34% 7.27% 7.33% Others Q2FY22 Q2FY23 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY21
Slide 34: Consolidated performance – NIMs + Fees
Consolidated performance NIMs + Fees Trending positively NIMS + FEE & OTHER INCOME 8.43% 8.23% 7.58% Q2FY22 Q1FY23 Q2FY23 r- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Slide 35: Consolidated performance – Asset Quality
Consolidated performance Strengthened and Stable Asset Quality CONSOLIDATED – ASSET QUALITY 0 57% 055% 0 55% 5,534 5,000 6.48% 7 % 4,000 3,559 3,591 3,000 2,398 4.08% 4.02% 4 % 2,000 2.92% 1,591 1,615 1,000 1.87% 1.85% 0 1 % Q2FY22 Q1FY23 Q2FY23 - - GS3 (Rs Cr) NS3 (Rs Cr) GS3 (%) NS3 (%) 0 PCR (%)
Slide 36: Conclusion
Conclusion PAT trending towards normalization; up 81% YoY to Rs. 406 Cr Highest ever Retail disbursements at Rs. 10,238 Cr 0 Retailisation continues with share of Retail increasing from 47% to 58% YoY Wholesale book rundown continues, book decreased by 14% YoY NIMs + Fees at 8.43% (up 85bps YoY) Imp
Slide 37: Appendix
Appendix 36 @ L&T Financial Services
Slide 38: Appendix
Appendix A LTFS: The Digital Backbone B Financials C Other key annexures 37 @ L&T Financial Services
Slide 39: Digital backbone to drive speed & scale
Digital backbone to drive speed & scale – consistently re-engineered DATA ANALYTICS DIGITAL CUSTOMER JOURNEY ACROSS LIFE-CYCLE Source Underwrite Collect Source Underwrite Disburse Collect App used by ~50% customers borrow only from LTFS Employee Micro LTFS sanction TAT: 90 secs Finance & Rural Rural
Slide 40: Reimagining customer engagement through superior customer experience
Reimagining customer engagement through superior customer experience SERVICING FRANCHISE SOURCING FRANCHISE Autonomous channels Assisted channels SHO Employees / Branches Call centre Employees Chatbot Whatsapp App Branches Call centre Partners Portal Agencies ~15,000 Employees, ~1,600 Meeting Centre
Slide 41: Data mining to unleash untapped potential for customer retention
Data mining to unleash untapped potential for customer retention Customer Retention% UNTAPPED CUSTOMER POTENTIAL EXISTING CUSTOMER RETENTION STRATEGY Database on disbursal This is not an exhaustive list Vishwas Business 1.4 Cr+ ~50% First Loan Pragati Loan Rural LAP Loan Loan Micro Rural Business Fi
Slide 42: Appendix
Appendix A LTFS: The Digital Backbone B Financials C Other key annexures 41 @ L&T Financial Services
Slide 43: LTFH Consolidated – Summary financial performance
LTFH Consolidated – Summary financial performance Performance Summary Q2FY22 Summary P&L (Rs Cr ) Q1FY23 Q2FY23 Y-o-Y (%) 2,823 Interest Income 2,846 3,002 6% 1,444 Interest Expense 1,413 1,438 0% 1,379 NIM 1,433 1,563 13% 304 Fee & Other Income 370 347 14% 1,682 Total Income 1,803 1,911 14% 584 Ope
Slide 44: LTFH Consolidated – Key ratios
LTFH Consolidated – Key ratios Key Ratios Q2FY22 Key Ratios Q1FY23 Q2FY23 12.73% Yield 12.99% 13.25% 6.22% Net Interest Margin 6.54% 6.90% 1.37% Fee & Other Income 1.69% 1.53% 7.58% NIM + Fee & Other Income 8.23% 8.43% 2.63% Operating Expenses 2.97% 3.19% 4.95% Earnings before credit cost 5.26% 5.24
Slide 45: Lending Business – Business wise disbursement split
Lending Business – Business wise disbursement split Disbursement Q2FY22 Segments (Rs Cr ) Q1FY23 Q2FY23 Y-o-Y (%) 1,149 Farm Equipment 1,532 1,304 14% 1,244 2W Finance 1,517 1,721 38% 2,116 Rural Business Loans 3,168 3,887 109% - Micro Finance Loans 643 531 479 Consumer Loans 1,010 1,328 177% 587 Ho
Slide 46: Lending Business – Business wise book split
Lending Business – Business wise book split Book Q2FY22 Segments (Rs Cr) Q1FY23 Q2FY23 Y-o-Y (%) 11,081 Farm Equipment 11,597 11,865 7% 6,935 2W Finance 7,488 8,093 17% Rural Business Loans & Micro 11,309 14,397 15,840 40% Finance Loans 1,173 Consumer Loans 3,027 3,979 239% 7,344 Home Loans 8,369 9,
Slide 47: Retail Finance – Summary financial performance
Retail Finance – Summary financial performance Performance Summary Q2FY22 Summary P&L (Rs Cr ) Q1FY23 Q2FY23 Y-o-Y (%) 1,572 Interest Income 1,807 1,972 25% 589 Interest Expense 664 718 22% 983 NIM 1,143 1,254 28% 120 Fee & Other Income 200 174 45% 1,103 Total Income 1,343 1,428 29% 445 Operating Ex
Slide 48: Retail Finance – Key ratios
Retail Finance – Key ratios Key Ratios Q2FY22 Key Ratios Q1FY23 Q2FY23 15.47% Yield 15.57% 15.65% 9.67% Net Interest Margin 9.85% 9.95% 1.18% Fee & Other Income 1.72% 1.38% 10.85% NIM + Fee & Other Income 11.57% 11.33% 4.38% Operating Expenses 4.30% 4.40% 6.48% Earnings before credit cost 7.27% 6.93
Slide 49: Retail Finance – Asset Quality
Retail Finance – Asset Quality Retail – Asset Quality 0 70% 0 75% 0 76% 1,850 1,727 1 5 % 1,688 1 3 % 1 1 % 9 % 7 % 505 5 % 4.12% 433 446 3.61% 3.55% 3 % 1.27% 0.93% 0.88% 1 % -1 % - Q2FY22 Q1FY23 Q2FY23 GS3 (₹ Cr.) - NS3 (₹ Cr.) • GS3 (%) • NS3 (%) 0 48 @ L&T Financial Services
Slide 50: Wholesale Finance – Summary financial performance
Wholesale Finance – Summary financial performance Performance Summary Q2FY22 Summary P&L (Rs Cr ) Q1FY23 Q2FY23 Y-o-Y (%) 1,198 Interest Income 1,000 1,014 (15%) 799 Interest Expense 731 707 (12%) 399 NIM 269 308 (23%) 78 Fee & Other Income 89 62 (20%) 477 Total Income 358 370 (22%) 95 Operating Exp
Slide 51: Wholesale Finance – Key ratios
Wholesale Finance – Key ratios Key Ratios Q2FY22 Key Ratios Q1FY23 Q2FY23 10.55% Yield 9.93% 10.21% 3.52% Net Interest Margin 2.67% 3.10% 0.68% Fee & Other Income 0.88% 0.62% 4.20% NIM + Fee & Other Income 3.55% 3.72% 0.83% Operating Expenses 1.08% 1.10% 3.36% Earnings before credit cost 2.47% 2.62%
Slide 52: Wholesale Finance – Asset Quality
Wholesale Finance – Asset Quality Wholesale Finance - Asset Quality 0 47% 037% 0 33% 2,922 2 1 % 1 6 % 1,825 1,735 1 1 % 1,539 6.87% 1,157 1,167 6 % 4.69% 4.72% 3.74% 3.03% 3.22% 1 % -4 % - Q2FY22 Q1FY23 Q2FY23 GS3 (₹ Cr.) - NS3 (₹ Cr.) •GS3 (%) • NS3 (%) 0 PCR (%) 51 @ L&T Financial Services
Slide 53: Infrastructure Finance – Portfolio wise split
Infrastructure Finance – Portfolio wise split D Sectors (Rs. Cr) Q2FY22 Q1FY23 Q2FY23 Y-o-Y (%) I S B Renewable Power 1,015 1,215 452 (55%) U R Roads 154 187 214 38% S E Power Transmission 161 - - (100%) M E Others 17 - 52 209% N T Total 1,347 1,402 718 (47%) Q2FY22 Q1FY23 Q2FY23 Sectors (Rs. Cr) Q2
Slide 54: Appendix
Appendix A LTFS: The Digital Backbone B Financials C Other key annexures 53 @ L&T Financial Services
Slide 55: Prudent ALM
Prudent ALM As on 30th September, 2022 Structural Liquidity statement 62,049 ■ Cumulative Inflows (Rs. Cr) ■ Cumulative Outflows (Rs. Cr) 37,954 37,127 25,774 22,819 19,302 12,090 14,234 10,944 9,364 6,421 1,013 1,825 3,061 1-7 days 8-14 days 15 days-1 1-2 months 2-3 months 3-6 months 6-12 months mo
Slide 56: AAA Credit Rating for LTFH and all its subsidiaries
AAA Credit Rating for LTFH and all its subsidiaries Credit Ratings – LTFH and its subsidiaries • Long-term ratings of LTFH and all its lending subsidiaries have been reaffirmed ‘AAA’ (Stable Outlook) by all 4 rating agencies: Ø CRISIL: Sep’22 Ratings Update Ø CARE: Sep’22 Ø India Ratings: Apr’22 Ø I
Slide 57: AUM disclosure
AUM disclosure Mutual Fund ASSETS UNDER MANAGEMENT (Rs Cr) Quarter ended Sep, 2021 Quarter ended June, 2022 Quarter ended Sep, 2022 Fund Type AUM1 Avg. AUM2 AUM1 Avg. AUM2 AUM1 Avg. AUM2 Pure Equity 34,304 33,356 30,313 31,978 33,790 33,338 Hybrid 13,232 13,226 9,413 10,174 9,019 9,372 Fixed Income
Slide 58: ESG@LTFH: Driving Sustainable Growth
ESG@LTFH: Driving Sustainable Growth People | Business | Community Awards and recognition Key Highlights MSCl 8 Retained MSCI ‘A’ rating for last 4 consecutive years ESG Ratings c«r:rhr:rtmr:r Awr:rrdfar ~11i113 tfl1d 'Crr:rmpr:rrmcp presmted l<1 Secured Rs. 225 Cr Sustainable Linked Loan in Q2FY23
Slide 59: ESG@LTFH: Driving Sustainable Growth
ESG@LTFH: Driving Sustainable Growth People | Business | Community Environment Social Governance Committed to environmental Investing in stakeholder relationships Ensuring robust governance mechanism stewardship by responsible business through transparent, ethical and through accountability, complia
Slide 60: Corporate Social Responsibility
Corporate Social Responsibility Directly linked to creating value Awards & Recognition Maharashtra CSR Awards 2022 awarded for Digital Sakhi Project (Maharashtra) Digital Financial Inclusion Reached out to 5,19,000+ community members, creating awareness on financial literacy Enabled 36,000+ communit
Slide 61: LTFS branch footprint
LTFS branch footprint BRANCHES MEETING CENTRE BRANCHES 7 37 2 10 38 1 9 15 33 57 9 4 315 45 4 13 27 13 63 119 17 1 48 1 6 32 7 113 27 32 10 As of 30th September, 2022 No. of States & Union 21 & 1 1 11 Territories 13 184 No. of branches 204 (Rural & Urban) No. of Rural Business Loans / 6 1,586 366 3
Slide 62: Well experienced and diversified Board
Well experienced and diversified Board BOARD OF DIRECTORS S.N. Subrahmanyan, Non-Executive Director, Chairperson Dinanath Dubhashi, Managing Director & CEO o Current Managing Director and Chief Executive Officer of Larsen & Toubro Limited. o Over 30 years of experience across multiple domains in BFS
Slide 63: Management Team
Management Team Dinanath Dubhashi Managing Director & CEO 32 yrs exp, BNP Paribas, SBI Cap, CARE Ratings Sachinn Joshi Kailash Kulkarni Raju Dodti Group CFO CE - Investment Management Rupa Rege Nitsure CE – Wholesale Finance 32 yrs exp, Aditya Birla Group Head - Marketing Group Chief Economist 24 yr
Slide 64: Registered Office: L&T Finance Holdings Limited
Registered Office: L&T Finance Holdings Limited Brindavan, Plot No 177 CST Road, Kalina Santacruz (E), Mumbai 400 098 www.ltfs.com T +91 22 6212 5000/5555 CIN: L67120MH2008PLC181833 63